Lopez-Santos v. Metropolitan Security Services

United States Court of Appeals
For the First Circuit

No. 18-1694

RAFAEL LÓPEZ-SANTOS and ERASMO DOMENA-RÍOS,

Plaintiffs, Appellants,

v.

METROPOLITAN SECURITY SERVICES,

Defendant, Appellee.

APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO

[Hon. Francisco A. Besosa, U.S. District Judge]

Before

Thompson, Lipez, and Barron,
Circuit Judges.

Judith Berkan, with whom Mary Jo Mendez and Berkan/Mendez
were on brief, for appellants.
Luis R. Pérez-Giusti, with whom Liana M. Gutiérrez-Irizarry,
Adsuar Muñiz Goyco, and Seda & Pérez-Ochoa, P.S.C., were on brief,
for appellee.

July 23, 2020
 LIPEZ, Circuit Judge. Appellants Rafael López-Santos

("López") and Erasmo Domena-Ríos ("Domena") served as court

security officers for the District of Puerto Rico for thirty-two

years. Their tenures ended in 2015 when appellee Metropolitan

Security Services d/b/a Walden Security ("Walden") assumed the

federal contract to provide courthouse security services and

refused to hire them because they lacked certification from a law

enforcement training academy. After López and Domena brought suit

for statutory separation pay pursuant to Puerto Rico Law 80, the

district court granted summary judgment for Walden.

On appeal, López and Domena argue that the district court

conducted the wrong legal analysis and that Walden should be held

liable pursuant to Puerto Rico's common law successor employer

doctrine. We agree that the district court misconstrued López and

Domena's theory of liability, leading it to conduct a largely

irrelevant analysis of their claims, but we nevertheless affirm.

Although we recognize the unfortunate loss of livelihood

experienced by López and Domena, the successor employer doctrine

is simply inapplicable to their case, leaving them with no remedy

pursuant to Law 80.

I.

The following facts are undisputed by the parties. López

and Domena both began work as court security officers ("CSOs") in

1983. They were among the original thirteen CSOs serving the

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District of Puerto Rico and received multiple accolades for their

excellent work.

The United States Marshals Service ("USMS") drafts and

manages the federal contract governing court security services for

the District of Puerto Rico. The USMS awards the contract to

private security companies, and those companies in turn hire CSOs

to provide the District of Puerto Rico courthouses with armed

security guard services. During the thirty-two years that López

and Domena worked as CSOs, a number of different private security

companies held the USMS contract at various times, and López and

Domena worked for all of those companies.

In September 2015, the USMS awarded the contract to

Walden, effective December 1, 2015. The contract set forth the

minimum qualifications for CSOs employed by the contractor.

Specifically, it stated:

[E]ach individual designated to perform as a
CSO [shall] ha[ve] successfully completed or
graduated from a certified Federal, state,
county, local or military law enforcement
training academy or program that provided
instruction on the use of police powers in an
armed capacity while dealing with the public.
The certificate shall be recognized by a
Federal, state, county, local or military
authority, and provide evidence that an
individual is eligible for employment as a law
enforcement officer.

The record demonstrates that this same language had appeared in

the USMS's contract with Akal Security, Inc. ("Akal"), the

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contractor immediately preceding Walden, as well as the contract

with MVM Security ("MVM"), the contractor immediately preceding

Akal.

In October 2015, Walden convened two meetings for all of

the CSOs who were then employed by Akal. During the meetings,

Walden provided information about its company policies and

benefits and invited all of Akal's CSOs to submit employment

applications to Walden. López and Domena attended Walden's

meetings and submitted applications. However, neither of them had

completed or graduated from a certified law enforcement training

academy, as required by the USMS contract with Walden. This fact

was reflected in their applications, both of which requested a

waiver of the certification requirement.

On November 30, 2015, the Vice President of Walden's

Federal Services Division notified López and Domena that they were

ineligible for Walden's CSO positions because they failed to

satisfy the certificate requirement. They were the only two Akal

CSOs not hired by Walden. As of December 1, 2015, they were out

of a job.1

1
It is not clear why the lack of certification did not become
an issue when López and Domena were hired by Akal and MVM, but
there is no evidence in the record suggesting that anyone ever
questioned the qualifications of López and Domena during the
fourteen years that MVM held the USMS contract, and the two to
three years that Akal held the contract.

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 Thereafter, López and Domena, along with other members

of the courthouse community, tried to dissuade Walden from

enforcing the certification requirement against them. Roberto

Santiago, the site supervisor under both Akal and Walden, spoke

with Walden representatives about López and Domena's extensive

experience and stellar employment records, demonstrating that they

had "the sufficient skills and knowledge to be CSOs." Then-Chief

Judge Aida M. Delgado-Colón and Judge Carmen Consuelo Cerezo asked

the USMS to waive the certificate requirement for López and Domena

in light of their long history of impeccable service.2

After all of those efforts failed, López and Domena filed

the instant lawsuit for statutory separation pay pursuant to Puerto

Rico Law 80, invoking the federal district court's diversity

jurisdiction. See 28 U.S.C. § 1332(a)(1), (e). In November 2017,

the parties filed cross motions for summary judgment, agreeing

that the relevant facts were not in dispute. The district court

granted Walden's motion, reasoning that Law 80 did not apply to

López and Domena's claims. See López-Santos v. Metro. Sec. Servs.,

2In a letter to Judge Cerezo, the USMS took the position that
because López and Domena were employees of Walden and not the USMS,
the USMS would not instruct Walden to waive the certificate
requirement; rather, Walden would have to affirmatively request
that the USMS waive the requirement. At oral argument, counsel
for Walden represented that Walden never asked the USMS for a
waiver because Walden did not interpret the contract as permitting
such a waiver. López and Domena dispute that interpretation of
the contract, but the dispute is not material to our analysis.

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Inc., 320 F. Supp. 3d 338, 343-44 (D.P.R. 2018). López and Domena

timely appealed.

II.

A. Legal Framework

We review a grant of summary judgment de novo, construing

the record in the light most favorable to the non-moving party.

See Lapointe v. Silko Motor Sales, Inc., 926 F.3d 52, 54 (1st Cir.

2019). As a federal court sitting in diversity jurisdiction, we

must apply state substantive law to assess whether summary judgment

is appropriate. See Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78-

79 (1938). Accordingly, Puerto Rico law governs the substantive

issues in this appeal. See 28 U.S.C. § 1332(e) (treating the

Commonwealth of Puerto Rico as a state for purposes of diversity

jurisdiction).

Puerto Rico Law 80 imposes a monetary penalty, commonly

known as the "mesada," on employers who discharge employees without

"just cause." See P.R. Laws Ann. tit. 29, § 185a (2015)3 ("Every

3All citations to Law 80 are to the version of the law in
effect in 2015 when Walden refused to hire López and Domena. Law
80 was amended in significant ways in 2017, but the amendment does
not contain a statement of retroactivity, see P.R. Laws Ann. tit.
29, §§ 185a-185n (added on Jan. 26, 2017, No. 4), nor do the
parties suggest that it should be applied retroactively. See,
e.g., Hughes Aircraft Co. v. U.S. ex rel. Schumer, 520 U.S. 939,
946 (1997) (applying the "time-honored presumption" against
retroactivity where "[n]othing in the [statutory] amendment
evidences a clear intent by Congress that it be applied
retroactively, and no one suggests otherwise").

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employee in commerce, industry, or any other business or workplace

. . . in which he/she works for compensation of any kind,

contracted without a fixed term, who is discharged from his/her

employment without just cause, shall be entitled to receive from

his/her employer, in addition to the salary he/she may have earned:

[various forms of compensation]."); Otero-Burgos v. Inter Am.

Univ., 558 F.3d 1, 7-8 (1st Cir. 2009) (describing the "mesada"

and the operation of Law 80). In this manner, Law 80 modifies the

concept of "at-will" employment, which traditionally permits

employers to dismiss employees who do not have a contract for a

fixed term "for any reason or no reason at all." See Otero-Burgos,

558 F.3d at 7 (internal quotation marks omitted).

Because Law 80 provides compensation for "discharge

without just cause," a plaintiff invoking Law 80's protection must,

as a general rule, demonstrate as a threshold matter that he or

she had an employment relationship with the defendant entity and

that the defendant entity terminated that relationship through a

"discharge." See P.R. Laws Ann. tit. 29, §§ 185a, 185e (emphasis

added). However, there are two exceptions to this requirement.

First, pursuant to Article 6 of Law 80, after the sale

of a business, "[i]n the event that the new acquirer chooses not

to continue with the services of all or any of the employees and

hence does not become their employer, the former employer shall be

liable for the [mesada]." See id. § 185f. Under those

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circumstances, although the seller did not technically "discharge"

the employee -- rather, the seller failed to protect the employee

in the contract of sale, and the acquirer subsequently declined to

hire the individual -- the seller is liable to pay the mesada

pursuant to Article 6. See id.

Under the second exception, known as the "successor

employer doctrine" and developed through Puerto Rico common law,

the acquirer rather than the seller is liable for the mesada. See

Rodríguez Oquendo v. Petrie Retail Inc. D.I.P., 167 P.R. Dec. 509,

__ P.R. Offic. Trans. __ (2006). Pursuant to this doctrine, if an

employer unjustly terminates one of its employees and then

transfers the business to a new entity through a sale of assets or

a merger, the previously discharged employee may hold the acquirer

liable for the mesada, even though it was the predecessor entity

that was actually responsible for the unjust discharge. See id.

Thus, the successor employer doctrine permits a plaintiff to seek

the mesada from an entity with which the plaintiff never had any

employment relationship at all.

B. The District Court Decision

Both before the district court and on appeal, López and

Domena have consistently invoked the successor employer doctrine

as their theory of liability. They concede that they were never

"discharged" by Walden, given that Walden never hired them in the

first place, and thus Walden cannot be liable under the traditional

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Law 80 analysis. They also explicitly disclaim reliance on Article

6 of Law 80, acknowledging that the plain text of Article 6

requires a sale of a business. There was no such sale from Akal

to Walden.

Yet the district court limited its analysis to the issues

conceded and disclaimed by López and Domena. Specifically, it

granted summary judgment to Walden because Walden was never López

and Domena's "employer" and thus never discharged them,4 and

because Article 6 of Law 80 does not apply to their case because

there was no sale of a business from Akal to Walden. See López-

Santos, 320 F. Supp. 3d at 343-44. In doing so, the district court

ignored the only theory of liability that López and Domena actually

do advance: the successor employer doctrine. This legal error

requires us to decide whether to remand for the district court to

conduct the proper analysis or to conduct our own legal analysis

of the successor employer doctrine's applicability in the first

instance, given the principle that we may affirm a grant of summary

4 López and Domena argue to us that the district court's
analysis of whether Walden was ever their "employer" improperly
relied on definitions of "employer" and "employee" that were added
to Law 80 by the Labor Reform Act in 2017. For the reasons stated
in footnote 3, we agree. However, this particular error is
immaterial, given the district court's larger error. Put
differently, the district court's misplaced reliance on these new
statutory definitions only came into play in a portion of the
district court's analysis that we find irrelevant.

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judgment on any ground supported by the record. See Robinson v.

Town of Marshfield, 950 F.3d 21, 24 (1st Cir. 2020).

We elect the latter approach. Because there are no

material factual disputes, our analysis is purely legal and

requires no further factfinding by the district court. Moreover,

the successor employer doctrine is so clearly inapplicable to López

and Domena's case that any remand to the district court would be

futile, resulting in a waste of the parties' resources.

C. Application of Successor Employer Doctrine

López and Domena's theory of liability based on the

successor employer doctrine fails for two distinct reasons. First,

the successor employer doctrine is applicable only where a

plaintiff seeks to hold the successor entity liable for a Law 80

violation by the predecessor entity. See Rodríguez Oquendo, 167

P.R. Dec. 509 (citing Piñeiro v. Int'l Air Serv. of P.R., Inc.,

140 P.R. Dec. 343, 40 P.R. Offic. Trans. __ (1996), which held a

successor employer liable pursuant to Law 80 for dismissals that

took place five months prior to the transfer of the business); see

also id. (explaining that the successor employer doctrine allows

a plaintiff "to hold an entity liable for the unfair practices

committed by another" (quoting L.R.B. v. Club Náutico, 97 P.R.

376, 390 (1969)). But here López and Domena do not take issue

with any action by Akal, the prior entity. Rather, they cite

Walden's failure to hire them as the triggering event for their

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Law 80 claim. Thus, the successor employer doctrine simply does

not apply to the situation at bar.

If that were not enough, the successor employer doctrine

is also applicable only where "an employer . . . replaces another

through a transfer of assets or a corporate merger." Id.; see

also id. (holding that the successorship doctrine applies to the

transfer of assets in a federal bankruptcy proceeding, even if

free of liens). In this case, López and Domena concede that Akal

did not sell a business to Walden -- indeed, Akal and Walden had

no relationship with one another other than the fact that they

happened to win the USMS contract in consecutive terms. For this

reason as well, Walden cannot be liable under the successor

employer doctrine.

López and Domena's arguments to the contrary are

unavailing. First, they invoke the multifactor test used to

determine whether the successor business "replaced" the former

business, a requirement for the imposition of successor liability

under the successor employer doctrine. See id. (holding that the

successor business has "replaced" the former business when there

is "a substantial similarity . . . 'in the operation and

continuity of the identity of the enterprise before and after the

change'" (quoting L.R.B. v. Cooperativa Azucarera, 98 P.R. 307,

316 (1970)). The factors examined by Puerto Rico courts include:

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 (1) [T]he existence of a substantial
continuation in the same business activity;
(2) the utilization of the same operating
plant; (3) the employment of the same or
substantially the same labor force; (4) to
maintain the same supervisory personnel; (5)
to use the same equipment and machinery and to
employ the same methods of production; (6) the
production of the same products and the
rendering of the same services; (7) continuity
of identity; and (8) the operation of the
business during the transfer period.

Id. (quoting Cooperativa Azucarera, 98 P.R. at 317-18) (alteration

in original). López and Domena argue that because the record

indisputably demonstrates that nearly all of these factors are

satisfied in their situation, we must hold Walden liable as Akal's

"replacement."

We generally agree with López and Domena's

characterization of the record, but that does not win the day for

them. Specifically, the fact that Walden may have "replaced" Akal

within the meaning of this multifactor test does not overcome the

threshold limitations of the successor employer doctrine that we

have already noted. Rather, those formal limitations prevent us

from even applying the multifactor test. To the extent that López

and Domena suggest that their case demonstrates the need to revisit

those formal limitations, that argument also fails. "A litigant

who chooses federal court over state court 'cannot expect this

court to . . . blaze new and unprecedented jurisprudential trails'

as to state law." Doe v. Trs. of Bos. Coll., 942 F.3d 527, 535

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(1st Cir. 2019) (quoting A. Johnson & Co. v. Aetna Cas. & Sur.

Co., 933 F.2d 66, 73 n.10 (1st Cir. 1991)) (omission in original).

Instead, we "must take state law as [we] find[] it: not as it might

conceivably be, some day; nor even as it should be." Kassel v.

Gannett Co., 875 F.2d 935, 950 (1st Cir. 1989) (internal quotation

marks omitted).

López and Domena also gain no benefit from the former5

executive order that they invoke. Executive Order 13,495 mandated

that new federal contractors offer a right of first refusal to all

qualified employees of the previous contractor. See Exec. Order

No. 13,495, Nondisplacement of Qualified Workers Under Service

Contracts, 74 Fed. Reg. 6103 (Jan. 30, 2009). Although the cited

executive order does reflect a federal interest in "a carryover

work force," see id., which arguably might be relevant to the

question of whether López and Domena's discharge was "without just

cause" under Commonwealth law, we never even reach that question

given the futility of López and Domena's successor employer theory

of liability.

5 Executive Order 13,495 was in effect when Walden assumed
the USMS contract in 2015. See Exec. Order No. 13,495,
Nondisplacement of Qualified Workers Under Service Contracts, 74
Fed. Reg. 6103 (Jan. 30, 2009) (previously codified at 29 C.F.R.
part 9). President Trump rescinded Executive Order 13495 in 2019.
See Exec. Order No. 13,897, Improving Federal Contractor
Operations by Revoking Executive Order 13495, 84 Fed. Reg. 59,709
(Oct. 31, 2019).

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 Accordingly, we must affirm the district court's grant

of summary judgment. So ordered.

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